15 things to consider when choosing private equity portfolio monitoring software

Operating partners, CFOs, and Investment Directors have historically leaned on manual processes and spreadsheets to evaluate the performance of their private equity portfolio. 

how to develop a value creation plan-631216-editedBut with the emergence of new digital technology the tide is starting to shift in the private equity community to next-generation solutions that do more than just monitor their investments, but also future-proofs their value creation planning and sets them apart in their analysis and reporting to their LPs.

Choosing a solution to monitor your private equity portfolio is not an easy or quick task and the wrong decision could be a costly investment so making the right choice is vital.

When deciding on any new portfolio monitoring software there are, we feel, 15 things you need to consider when choosing the right solution.


1. User Adoption

Getting buy-in from all users is the first step in introducing any new digital technology within your organisation.  According to Alphaweek "part of the reason for the lack of adoption of digital transformation strategies could be because it means different things to different people. For some, they hear the phrase ‘digital transformation’ and think that it simply means migrating technology applications to the cloud”.

The best portfolio monitoring software will be used by both the GP and members of each portfolio company. A software tool is only as good as its user base, and the same goes for a portfolio monitoring platform. With so many stakeholders involved, it is important to think about the value offered at each level.

  • Do the reports meet the needs of the partners?
  • Can the CFO trust the data?
  • Does the tool offer a user-friendly process for collecting monthly operating metrics?

If the answer to these questions is yes, then you are on the way to users relying on the tool and realising added value.


2. Is it built for Private Equity?

Both a benefit and a key factor in choosing any software solution is how well it fits into your current workflow. You want a system that can increase efficiency across your teams, internally and externally. Platform’s that are modelled on existing private equity workflows will be easy to adopt and easier to onboard.

An added benefit to consider is a system that not only understands the needs of each user but also aligns all the stakeholders with the same objectives and priorities.


3. Take the Long View

The best type of software solution is one that can be customised to your needs, seamlessly fitting in with not just your current requirements, but one that can be easily adapted to meet the constant and evolving changes to how you evaluate your portfolio.

Investment strategies, personnel and requirements tend to change over time, and partnering with a solution that evolves with you will bring long term value and stability.


4. Visibility / Transparency

Private equity portfolio managers need clear insight into a wide range of metrics from specific company performance to IRR and multiples calculations. This level of visibility is essential for effective long-term value creation planning and reporting. Some of the best private equity portfolio monitoring solutions provide accurate real-time reporting.


5. Cost

Depending on the provider there will be different commercials structures. Most products now are based on an annual fee. It will be important to understand how the commercials are organised, by AUM or by Asset, is there a managed service or implementation fee?

Are there going to be on-going costs over the course of the vendor relationship or is support included?

Depending on the overall structure of the software platform, some costs may be borne by the portfolio company. The most cost-effective route will always be to find a vendor that can meet your long-term needs.


6. How does it integrate with your current tech stack? 

Reviewing your current solutions and what you need is a crucial part of the process.

  • Do you want a standalone solution or something that complements your existing technology?
  • Do you want something that also offers business intelligence and reporting capabilities?
  • Do you need something that integrates value creation planning at both a fund and company level enabling you to contextualise financial performance against your value creation plans?

Answers to these questions will help you fine tune your vendor selection.


7. Can it access existing data? How accurate is the data?

Data has always been at the heart of evaluating and monitoring a private equity portfolio. Even the most basic valuation model relies on consistent and accurate reporting from a fund’s assets.

Close up of human hands using virtual panelWith the Coronavirus pandemic continuing to shake up the industry across the globe, data has a new role to play in private equity and access to accurate data is now even more critical to make more informed decisions.  It is no surprise that according to Gartner "the prescriptive analytics software market will reach $1.88 billion by 2022, representing a 20.6% compound annual growth rate from 2017".

The right solution needs to not just access your existing data but capture deeper market data; you need data you can trust.  Accurate and timely financial data is vital to present reliable, concise quarterly reports to stakeholders and shareholders.

Solutions that can directly access the accounting system of your portfolio companies and flow through to the GP level feeding into your stakeholder and investor reports should be high on your list of considerations.


8. Can it be used across your whole portfolio?

A solution that just monitors one fund maybe all that you need for now. But it is important to consider future needs as your portfolio grows and evolves. A solution that you can use across your whole portfolio to align all the various stakeholders could be a great advantage and should be an important consideration to help future-proof your portfolio monitoring.


9. What Board Reporting tools does it offer?

How will the solution help you with your quarterly Board Reporting?  Adoption of software for board reporting is still in its infancy, indeed, a recent paper from Nasdaq and Stanton Chase found that just over a quarter of the companies surveyed confirmed their boards utilise digital services for board and collaboration software. 

Software that can automatically integrate all the information you need to produce your Board and Investor reports will save you a great deal of time ahead of your investor meetings. 


10. How does it align with your ESG strategy?

According to Forbes "there's been a lot of talk about environmental, social and governance (ESG) issues dealing with hedge funds, but these topics are spilling over into private equity as well".

ESG imageThe Coronavirus pandemic has shone a spotlight on the ESG aspects of private equity investments.  ESG factors are impacting post-COVID value creation planning and investors' scrutiny of ESG criteria for potential investments is increasing. 

ESG is now front of mind for all Private Equity Managers. It is worth considering solutions that can help you control and manage your ESG strategy and improvement actions and initiatives across your portfolio and ensure ESG is firmly embedded into your investments’ value creation planning.


11. Is it quick to get up and running? How much time is needed for training?

Before buying a portfolio management tool, ensure the systems you evaluate are intuitive and user friendly.  If you and your team need extensive training in order to get comfortable with the platform, you can assume that you may be late with your financial reporting.


12. Implementation

To ensure your onboarding is not only efficient but also sets you up for success, confirm you are working with a dedicated consultant who can show you the best practices and configure the tool to the needs of your fund.

Having a trusted advisor to partner with you during the implementation is crucial so your team can start using the tool as soon as possible and begin realising its value.


13. What ongoing customer support is offered?

No matter how well the solution is developed, technical problems may occur now or then. If you don’t want to have unpredicted costs, make sure the vendor whose software you are interested in offers adequate customer support to solve any issues or problems that do arise. Also consider what online training and resources the vendor provides.


14. Do you need mobile access and is it available?

Mobile is a given these days. With remote working now commonplace you need to be able to access your investments’ progress on the move at any time. Don’t forget to check with the vendor if they have a mobile version or app available for all devices.


15. How will it help you make better decisions in your value creation planning?

Finally, think about how a platform will help you manage your portfolio in a more efficient and better way.

You need software that can help you track and monitor the value creation plans for each of your portfolio companies, maximise the risk-adjusted value of the portfolio and help you create risk response plans.

Investigate whether the tool can get you an objective view of the risks to achieving a successful return for your portfolio companies and give you an insight into how much value will be created by your value creation initiatives and if the chosen actions can maximise that value.


Quick summary

What to consider when choosing private equity portfolio monitoring software

  1. User Adoption - have you got everyone's buy-in?
  2. Is it built for Private Equity - how well does it fit into your current workflow?
  3. Take the long view - will it evolve with you and your portfolio?
  4. Visibility / transparency - will it give you the right insight?
  5. Cost - consider the different commercials structures.
  6. How does it integrate with your current tech stack?
  7. Can it access existing data and how accurate is the data?
  8. Can it be used across your whole portfolio?
  9. What Board reporting tools does it offer?
  10. How does it align with your ESG strategy?
  11. Is it quick to get up and running and how much time is needed for training?
  12. Implementation - will you be working with a dedicated consultant?
  13. What ongoing customer support is offered?
  14. Do you need mobile access and is it available?
  15. How will it help you make better decisions in your value creation planning?



Today’s private equity managers are faced with greater competition for deals and massive market interruptions like COVID-19. Those who are continuing to create value through it all will depend on an analytical approach, a robust framework and a solution that is consistent and reliable.


Magnifying glass with 2021 and question mark blocks

Juan Manrique, Founder of UNTAP by EXM comments "our customers have realised this year they need to do something different and need closer control of assets and better communication with their investment teams and by employing more advanced software and systems to do this will help them steer a clearer path through 2021".  


Choosing the right software to monitor the performance of your private equity portfolio of investments has never been more critical.

If you are considering choosing a private portfolio monitoring solution why not give us a call, see how we can help.

Get in touch


Further reading

What is portfolio monitoring in private equity?

Benefits of portfolio monitoring software for private equity

When is the right time to think about portfolio monitoring software?


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